Financial inclusion is an important component of inclusive growth. Discuss what financial inclusion is and how it helps both the state and citizens. Also discuss some of the steps taken by the government in this regard.
- Define financial inclusion and interlink how financial inclusion is component of inclusive growth
- Discuss benefits of financial inclusion
- Discuss steps taken by government
- Conclude appropriately
Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. It not only includes the accessibility to banking services but also extends to other financial products like insurance, equity, pension and other products.
Financial inclusion ensures that benefits of growth are reaching to weaker sections of society by integrating them into the formal economy, thus it is an important component of inclusive growth.
Benefits of financial inclusion for individuals:
- It ensures credit accessibility from formal banking sector rather than from informal economy where rates are high and fund availability is low.
- It provides accessibility to formal dispute redressal system in case of any dispute between borrowers and lenders.
- It brings them under the state sponsored security net.
Benefits for State:
- It plugs gaps and leakages in public subsidies and welfare programmes.
- The government can directly transfer the subsidy amount into the account of the beneficiary.
- It ensures that the benefit of the welfare programmes reach the real beneficiary directly and thus helps government to achieve the target of Inclusive growth.
To improve financial inclusion in the country the government has taken following initiatives:
- With the Jan Dhan Yojana, the GOI is striving to end the financial untouchability by ensuring that the economically weaker sections have access to bank accounts.
- Through Pradhan Mantri Suraksha Bima Yojana (Accident Insurance), Atal Pension Yojana(Unorganized Sector) and Pradhan Mantri Jeevan Jyoti Yojana (Life Insurance), the GOI is providing social and economic security to the marginalized sections of the society.
- Under the MUDRA Yojana, GOI is providing microfinance to entrepreneurs in rural hinterland of India.
- The government has advised the banks to deploy micro ATMs and White label ATMs in rural areas.
- Financial Literacy Centres are being setup at the request of the RBI in different parts of the country.
- With the Venture Capital Fund scheme, the SC/ST groups are being encouraged to become job providers instead of job seekers. Under this loans are being provided to the SC/ST group at minimal rates.
The government is committed to its target of financial inclusion through which funds mobilised from the people are now being brought in to the formal channel. It will definitely give the economy a thrust on its path of inclusive growth.
Subjects : Editorials